An agenda for the New Development Economics

This article discusses the new development agenda and means of challenging the reigning neoliberal paradigm. The limitations of this competitive equilibrium model are widely recognized; it provides an inadequate model of developed countries, and therefore a poor starting point for the construction of a model for developing economies. Despite this, the neoliberal, "Washington Consensus" model has continued to use this as a basis for policy analysis.

There is no single, overarching model to replace this model: the world is too complex. But there are a set of tools and perspectives that can be used, and some simple macro-models have been constructed making use of these tools and perspectives. Much of the theoretical and empirical work in developed countries has focused, for instance, on agency theory (how information imperfections affect firm behavior and labor markets), the new industrial organization (how imperfections of competition affect corporate behavior), finance (viewed as centering on the information problems associated with allocating capital and monitoring its usage), and R & D.

Development needs to be seen from a new perspective, as a transformation of society, not just an increase in physical and human capital. The new development researc agenda needs to focus on:

• identifying and explaining key characteristics of developing countries, and especially those that differentiate them from the more developed countries, and exploring the macro-economic implications, e.g. for growth and stability
• describing the process of change, how institutions, including social and political institutions, and economic structures are altered in the process of development. This includes analyzing reform processes: how can those wishing to effect certain changes bring those changes about, and what are the impediments in doing so.
• looking at macro-instability, both how to reduce its depth and frequency and how to respond to the downturns and crises that seem to occur with such frequency. It is now recognized that many of the Washington consensus policies that were foisted on developing countries, did little to increase economic growth, and may have contributed significantly to economic instability. This includes issues related to goverance and corruption

The adoption of this new perspective will require institutional changes in the career structures of development economists:

• this is not easy as virtually all economists are trained within the neoliberal paradigm
• young scholars need to be sensitised to alternative paradigms at fertile periods in their career
• it is vital that economists with alternative perspectives network successfully
• achieving tenure in leading educational institutions requires publications. However, many journals are not as open to alternative perspectives as they should be. The creation of a high quality refereed journal (partly internet based) may help to rectify this problem

[adapted from author]